Why You Should Sell Your Investment Property Now!
I am going to start this article by saying I am not a fear monger. That being said, I look at History and Simple Economics and I see a trend that I want people to know about. I have been a Realtor for 19 years, and specialize in investment property. I am an economics nerd, and study it with a passion that is only bested by my love of History.
The trend that I am seeing, and the reporting that seems to be covering it up, are all too familiar to me. In the Fall of 2007, I kept telling the sellers I was working with that prices were headed lower. I kept getting the same response “it will be better in the Spring”. I explained that a huge portion of the pool of buyers were no longer able to qualify and that those who were buying on speculation were backing away. It didn’t matter, my sellers had never experienced a downturn in real estate prices and in their minds it wasn’t going to happen.
I am seeing a similar trend right now. The forbearance rate (the percentage of borrowers that haven’t paid on their mortgage for 90 days or more) is at 8.1%.
To put that in perspective it is normally under 1%. I did some research and found that the percentage for Minnesota is 5.4%.
The headline for an article in National Mortgage News by Paul Centopani states “Mortgage Rates Tumble Almost 3X from the week before.” That might be enough info for someone that only reads the headlines and isn’t excited by reading National Mortgage News, so I did the work for you.
The issue I see is that the article and national reporting on the subject have been keeping two important facts out of their headlines. First, the number of loans in forbearance, and likely eventually to be foreclosure and short sales is not really telling the whole story. The issue is being kicked down the road like a tin can. The same article went on to say that 10% of all loans that were in forbearance were placed in deferral plans, and 16% had done the same in the week prior. There are currently 4.5 million homes in the U.S. in a loan deferral program. The total recent age of home in forbearance, or in a deferral program totals 16% of all mortgages. That’s a big number! That's one out of six homes that have mortgages that are in trouble. If you’re wondering, 37% of homes are owned free and clear.
16% of all Mortgages are forbearance or deferral programs.
Keep in mind, the Government has offered deferral programs before, but it just delays the inevitable; most of the homes will be foreclosed upon. The problem with the deferral programs is that most of them require the borrower to pay the full amount that has been deferred at the end of the 90-180 days. If the borrower can’t make their mortgage payment, how are they going to suddenly come up with the full amount six months later?
One final thought. Whenever a market has a boom, the bust doesn’t take months to happen, it is generally a sudden shock to everyone that it has changed.
Call me at 612.332.9000 if you have questions or would like a free price evaluation on your rental property. I have consistently been the number one seller seller of 2-4 unit properties in the Twin Cities over the past decade. I will get you the best price, in the shortest amount of time, with the smoothest process.